Silver Set For All Time Record Quarterly Close - Gold To Silver Ratio On Way To 17 To 1 As Per 1980?

Tyler Durden's picture

From GoldCore

Silver Set For All Time Record Quarterly Close - Gold To Silver Ratio On Way To 17 To 1 As Per 1980?

Gold and silver have consolidated on yesterday’s gains as inflation, geopolitical and eurozone debt concerns support. Silver has risen above its 31 year record closing price of yesterday and looks set to target new record nominal intraday highs above $38.16/oz.

‘Poor man’s gold’ is set for a record nominal quarterly close which will be bullish technically and set silver up to target psychological resistance at $40/oz and then the nominal high of $50.35/oz . Silver’s record quarterly close was $32.20/oz on December 31st, 1979.

While silver is up 22 percent this year and is heading for a ninth straight quarterly advance, its fundamentals remain very sound. With gold above its nominal record of 1980, poor man’s gold continues to be seen as offering better value. To the masses in India, China and Asia, silver is the cheap alternative to gold and an attractive store of value and hedge against inflation and debasement of paper currencies.

Increasing global investment and industrial demand in the very small and finite silver bullion market is a recipe for higher prices.  Thus, as we have long asserted the gold silver ratio is likely to revert to its long term average of 16 to 1.

A return to a ratio of 16 to 1 is likely due to basic supply and demand and the geological fact that there are 16 parts of silver for every one part of gold in the earth’s crust.

The fact that a huge amount of silver has been used in industrial applications and consumer items since the industrial revolution of the 19th century makes a return to the 16 to 1 ratio likely in the long term.   

$40/oz silver may offer psychological resistance and could see profit taking but those buying silver are strong hands who rightly believe that silver will very likely reach its 1980 nominal high of $50.35/oz. Real silver bulls believe that silver may reach its inflation adjusted high of $150/oz (see Financial Times Infographic below).

A tiny minority of retail investors have begun to look at silver but it remains largely the preserve of the smart money, a very small amount of hard money advocates in the U.S. and of store of value buyers in Asia. Much of the price gains seen recently may be due to banks closing out some of their massive concentrated short positions which are being investigated by the Commodity Futures Trading Commission (CFTC).


(Bloomberg) -- Faber Says Investors Should Hold Gold Amid U.S. Monetary Policy

Marc Faber, publisher of the Gloom, Boom & Doom report, said investors should have from 10 to 20 percent of their portfolio in gold as an inflation hedge.

“I want to buy more gold,” said Faber in an interview in Mexico City today. “Each time that I see Mr. Bernanke, and each time Mr. Tim Geithner opens his mouth, I feel like buying more gold and silver.”

Federal Reserve Chairman Ben S. Bernanke kept plans to buy $600 billion of Treasuries through June. Bernanke said last month the U.S. needs faster employment growth for a sufficient time before policy makers can be assured the economic recovery has taken hold. Meanwhile the bank will seek to hold borrowing costs “exceptionally low.”

Under current U.S. monetary policy “gold will go up substantially,” Faber said. “I own gold as an insurance policy, because I think the whole system will collapse one day.”

(Bloomberg) -- Bolivia Protesters Halt Operations at San Cristobal Silver Mine

Sumitomo Corp.’s silver, zinc and lead mine in Bolivia has been halted since last week by a strike, the mining ministry said. Workers at the San Cristobal mine are demanding better health care, a government official, who can’t be named because of ministry policy, said today by telephone.

Sumitomo’s San Cristobal, in southwestern Bolivia’s mineral-rich region of Potosi, is the world’s third-largest silver mine and the sixth-biggest zinc mine.

(Bloomberg) -- Gold Heads for 10th Quarterly Gain on Investment Haven Demand

Gold headed for a 10th straight quarterly rise, the longest in three decades, as turmoil in the Middle East, fighting in Libya and Japan’s nuclear crisis increased demand for an investment haven. Bullion for immediate delivery advanced 0.3 percent to $1,427.13 an ounce at 5:28 p.m. in Melbourne, taking the quarterly gain to 0.5 percent. The June-delivery contract in New York rose 0.3 percent to $1,428.50, heading for a 0.5 percent quarterly rise.

“There is a lot of uncertainty around the globe in terms of political events,” David Lennox, a Sydney-based resource analyst at Fat Prophets, said by phone today. Fighting could escalate in Libya, while there is uncertainty surrounding Bahrain and the nuclear crisis in Japan, he said.

Gold reached a record $1,447.82 an ounce on March 24 amid tension in northern Africa and the Middle East and after a March 11 earthquake and tsunami in Japan killed thousands and caused radiation to leak from a nuclear plant. Libyan rebels were forced to retreat this week by troops loyal to Muammar Qaddafi after earlier advances were helped by U.S.-led air strikes.

“We are now starting to see that the air strikes may not be completely effective against Qaddafi, and that’s going to raise the next bar,” Lennox said.

Gold advanced for nine consecutive quarters through Dec. 31, 2010, partly because investors bought the metal as a hedge against dollar and euro weakness. Gains were limited this quarter on signs the U.S. economy is improving, boosting investor appetite for higher-yielding assets like stocks.

‘Upward Advance’

“In nominal terms it has been a pretty steady upward advance, but it has come off a period prior to 2000 where we basically had 20 years of flat gold prices,” Ben Westmore, an analyst at National Australia Bank Ltd. in Melbourne, said today.
Companies in the U.S. added 201,000 workers in March, a sign the labor market may be strengthening, according to figures from ADP Employer Services yesterday. Employment increased by a revised 208,000 in February, said the report, which is based on payrolls.

Economists project a Labor Department report tomorrow will show the jobless rate held at 8.9 percent. It has fallen by 0.9 percentage point over the last three months, the biggest decline since 1983.

The Standard & Poor’s 500 index rose 0.7 percent yesterday and is up 5.6 percent this quarter. “Buoyant equities and a positive U.S. ADP employment report removed some of the safe-haven premium” in the gold market, Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd., wrote in a note today.

Silver for immediate delivery climbed 0.4 percent to $37.62 an ounce, heading for a 22 percent rise this quarter, the ninth straight quarterly gain. The metal has more than doubled in the past year and reached a 31-year high of $38.165 on March 24. Immediate-delivery platinum was little changed at $1,773.90an ounce and palladium gained 0.7 percent to $758.75 an ounce.

(Bloomberg) -- Six Arrested in Bundesbank Euro Coin-Forgery Scam, Prosecutors Say
Six people were arrested in a probe over 29 metric tons of forged euro coins that were cashed in at the Bundesbank, German prosecutors said.

The suspects received 1-euro and 2-euro coins from workshops in China where destroyed coins were remade, Doris Moeller-Scheu, a spokeswoman for Frankfurt prosecutors, said in an e-mailed statement today. No employees of Germany’s central bank are suspected of wrongdoing.

The Bundesbank is the only central bank in Europe that exchanges damaged coins without charging a fee, according to Moeller-Scheu. The money must be returned in bags that hold 1,000 euros worth of coins.

“The Bundesbank controls the value mainly by weighing, and does occasional visual sample test,” Moeller-Scheu said. “Then the money value is transferred to an account of the presenter or he can withdraw it from a Bundesbank account.”
Four suspects are of Chinese descent, according to the statement. They were helped by flight attendants who transported the coins in their hand luggage, for which no weigh limit applies, Moeller-Scheu said.

Lufthansa was informed that some individual employees are being investigated, Deutsche Lufthansa AG spokesman Peter Schneckenleitner said in an interview. He said the company wouldn’t comment on prosecutors’ probes.

The 29 metric tons of coins were imported between 2007 and 2010, representing a nominal value of 6 million euros, Moeller- Scheu said.

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TexDenim's picture

Time to melt down grandma's dinner service. Sell!

Just Observing's picture

In 2-3 years, you'll SURE wish you had waited, unless you plan to put the proceeds in something else that is real.

Malaespina's picture

In Roman times, the Silver to Gold price ratio was 25, and inflation was high with all the pillage and sacking coming from the provinces! So, with Gold above 1400, Silver could well be at 56!!!!!!!

silvertrain's picture

I dont think we know what it could be , should be , or might be due to the fact that it hasnt been able to trade freely in many years..

malikai's picture

It seems to me that the ratio should be even lower if we are talking nominal terms. Considering the fact that large amounts of silver are sitting in landfills, the industrial demand is large, and there is more gold above ground than silver.


JLee2027's picture

Israel Friedman says Silver will surpass the price of Gold. Eventually an ounce of Silver will be worth multiple ounces of Gold.

chumbawamba's picture

Perhaps for a moment, but doubtful.  Silver is in a classic bubble, albeit long term and a long way from the top.  Once the wave breaks, silver will fall to a level supported by industry, and gold will be gold.

I am Chumbawamba.

tekhneek's picture

God, but you're wrong. The supply/demand fundamentals don't tell me that. I have no doubt it will "peak" and could crash to an extent, but I personally think the gold/silver ratio will flip on its head due to the rarity and the fact that, gold's cool for jewelry, but you can't fucking send shit to outerspace and make superconductors with gold. You can with silver.

Industry will demand continuously more and more silver. I'm sure the jewelry/investmend demand will pick up, but I highly doubt silver will "burst" down to a level supported merely by industry. Besides, how much does industry pay for an ounce of silver when there's a fixed, accounted for volume left?

I'm long land fills and silver. We haven't even experienced frantic buying, or anything of that nature and look where it's at already and the price is still artificially LOW. I don't see how it's a bubble personally. Just because something goes up, doesn't always necessarily mean it must come down.

mick_richfield's picture

He has a point, but I think the psychological barriers are too great.  But I think that Au/Ag will indeed surpass historical mean of 15 or so.

I do not believe that Au/Ag will get smaller than 5.  I think that would be a reasonable time to sell your Ag.  Sell it for Au, I mean.


Oh, and ... Fed delenda est.


akak's picture

I do not believe that Au/Ag will get smaller than 5.

I tend to agree, if for no other reason than the fact --- often overlooked by those over-enthusiastic silver bulls who like to focus on above-ground stockpiles only --- that there is still around nine times more silver mined in any one year than gold.

Don't get me wrong, I am very bullish on silver, but this idea of silver one day being MORE expensive than gold is just crazy talk, in my humble opinion.

False Capital's picture

Do you have a reference for there being more silver than gold above ground? I can well believe that central bank stockpiles are weighted towards gold, but in absolute totals? I don't see many of "grandma's dinner sets" being made of gold. As the price of silver rises it should draw more silver to market. There must be tons of old silver currency and tableware just waiting to be remelted, whereas most of the monetary gold is already in circulation and much unwanted gold jewellery has already been bought up by "we buy gold" scam merchants.

cowdiddly's picture

I don't own much silver, but here is some silver porn for you guys. Makes you want to go grab a bar or two. The local shop is sold out of bars till next week and I met a guy in there that was an old stock trader makes you go Hummm...........


High Plains Drifter's picture

Why did Rome collapse?  What was the real reason? 

chumbawamba's picture

Nobody thought to open a history book to read how it ends.

I am Chumbawamba.

High Plains Drifter's picture

the real reason why Rome was destroyed was the concept of  the interest rate on money, no? Seems like over time, they picked up some new "citizens" from the middle east, who had ideas on money and the rest is hiss tow ree....

savagegoose's picture

they taxed in gold,. but paid in silver. had too many controlling gov restrictions. and basically the provinces saw life under the barbarians as giving more freedom than under rome. also continiously reduced the amount of silver in silver coins over time. till nerr the end almost no silver was in coins at all.

farm companies developed, owning massive areas of land and people who where broke forced to work farms as a pre cursor to landed serfs. individual farmers where taxed but companies with contacts in gov got tax concessions, meaning  going into debt to pay taxes and ending up farming own land for the companies.

subsidised food for city people also brought about higher taxes for those unfortunate to have to pay it.

it was also all based on conquest and looting gold form the conquored. once they reached a limit, there supply of gold dried up thus the devaluing by reducing precious metal content of coins.

then there is also stories of  rome being in a period of globull warming that ended and farm productions being reduced. they once grew grapes in the brittain im lead to believe.


ermm provincial leaders where told what tax to collect and what was short came out of their personal wealth. = harsher and harsher taxes and provinces thinking that maybe the barbarians might not be such bad rulers after all.


heheh thats how i percived it not rerally one reason, but i can see comparisons with the USA

Dan The Man's picture

Oh god please !!!

Sheikh Djibouti's picture

Looks like someone has started forging Euro tokens en masse.

Just Observing's picture

IF it's the same metal content as current Euro coins, is it REALLY a forgery ??  Remember, imitation is the most sincere form of flattery....he he he.....

unwashedmass's picture


blythe has a few hours to stop this.

she's got JPM billions AND FED BILLIONS .....

And she's got the CTFC steadfastly looking the other way.

Make it so, Blythe, make it so.

unwashedmass's picture


blythe has a few hours to stop this.

she's got JPM billions AND FED BILLIONS .....

And she's got the CTFC steadfastly looking the other way.

Make it so, Blythe, make it so.

JonNadler's picture

I can't wait for silver to hit $50 so I can start screaming DOUBLE TOP!


GoldCore's picture

Always enjoy the comments on Zero Hedge. The bears who continue to scream 'sell' despite the hugely positive fundamentals are beyond myopic and appear to be borderline delusional. They have yet to realise that owning gold and silver is not about trading or the mundane buying and selling but about owning financial insurance that will protect from the massive geopolitical, environmental, macroeconomic and monetary risk facing humanity.

Our GoldNomics video may enlighten as to why gold has retained value throughout history:

While we remain bullish on silver, gold remains the ultimate safe haven and it is worth remembering that gold's portability saw it surge in value versus silver in the Weimar hyperinflation.

Blindweb's picture

Supposedly that was due to the threat of a Communist takeover.  If it's time to run for the border, the gold silver ratio may change directions. 

tmosley's picture

Yes, silver is speculative, and is only a trade with the goal of getting a larger amount of gold at some point in the future.

sudzee's picture

Silver is not very good for big money. Gold is the only refuge for 10's of trillions of fiat becomming more worthless every day.

Turd Ferguson's picture

You protect your wealth with gold.

You protect your ability to purchase things with silver.

Snidley Whipsnae's picture

+1 Most here don't get it even though they probably use copper clad coins daily.

In some countries in SE Asia 95% of real estate transactions are settled in gold... coming to a realtor near you in the near future.

Interesting how after each options expiry bullion banks try to run the stops and then, next day, PMs take off again. Lows are getting higher on each cycle = Fed slowly losing control.

quasimodo's picture

Great point Snidley. The half life of all these shenanigans gets shorter and shorter each time. Too bad fuckyousheema was not the same.

zaknick's picture

What a joke of a report.

Libya....Bahrain pffft much bigger events aré behind this situation. More like S+P downgrades against IMF wishes yesterday and now the threat to stop rating with Bretton Woods 3 against some banksters wishes.

johny2's picture

20 to 1 ratio sounds reasonable. 

sullymandias's picture

parity sounds reasonable to me

JohnnieWalker's picture

The ECB raising interest rates from a 1% base-level won't keep spot silver under $40 for long. If gold takes out $1500 and starts to outperform we could go parabolic.

gordengeko's picture

FYI, for every $1 move in spot silver, AGQ moves roughly $10 fiat US dollars.  Silver at $50 is about $345 in AGQ dollars.  Current prices are $37.80/$226 roughly.  So in theory with say a $19K investment you could buy 500 ounces (not including premiums) or 84 shares of AGQ.  Silver spot hits $50/$345, cash in your AGQ and you could buy roughly 580 ounces.  Net an extra 80 ounces of physical.  If enough investors did just that, one would theorize it could very well push the fiat spot price even higher in a short amount of time because more physical could be bought thus removing even more physical from the marketplace.  Thoughts?

magis00's picture

I agree GG.  2 comments to submit for consideration:  First, playing the leveraged paper game is sure to win in medium- to long-term, because AG spot is going up one way or the other; Second, there's a time-value of money tension because while your agq may hit 345 in three or six or twelve months, that $345 cash may not find any available silver, or the premiums over and above the $50 spot may ask for more than the juice from your agq investment.  For me, as much physical as possible is the solution - with IRA account FRN play money to agq, slw, exk, etc.  GL

gordengeko's picture

True, I'm actually thinking more along the lines of dumping half of a larger investment and buying more physical (or try to) then let the rest of the fiat investment ride up the rest of the way.  I've put many in AGQ (some even got lucky and scooped up AGQ at $120-130 in the Feb lows) because I could not get them to buy physical, rest assured I will convince them once it hits $50.  But this all just leads to a zero sum game for the US dollar, I get that, this strategy will just extrapolate the decimation of the current monetary system.  Use their own shit against them basically. :)

Snidley Whipsnae's picture

Sounds workable Gordon. Problem is it requires holding paper for some amount of time...and, no one wants to be holding paper when the music stops.

Saxxon's picture

AGQ is wonderful if you are on the right side of the trade; which anyone in the past eight months playing AGQ long, has been.

It is a volatile issue; moreso than the triple ETFs these days.  You need to believe in the position and be prepared to ride out corrections that take longer than you had anticipated.

gordengeko's picture

I think there will always be some sort of paper currency that has a nominal value to physical.  So even if the US dollar music stops, it will still hold some value in relation to physical I would think.  The hard part is trying to make more $$$'s while the dollar itself is falling.  One way is to play leveraged stocks/options if yuo know what you're doing.  You would be surprised how many don't know how close we are to the end game. 

One way to play silver is AGQ on the way up and if you are good ZSL on the way down for a quick 2-10%, then buy more AGQ on the dips.  You could also do options, neither of which are for the faint of heart since the moves are fast and furious.  It is the crack of the market, but hey it's all an illusion of digits on a screen anyway.

Weisbrot's picture

perhaps he left beacuse WB caught him sitting in his chair

Moe Howard's picture

One to one ratio if "Pants Suit' Clinton keeps launching cruise missiles at 'Worm Lips' Momar 'Many of Many Spellings' Kaddfeey.

How many kilos of silver in a Tomahawk?




<HELP> For Explanation.

DavidC's picture

"...each Tomahawk has more than a monster box (500 oz.) of silver inside of each missile."

See my link below - I haven't verified it, though I did read another piece the other day that said 15lbs (= 240 oz.).


Just Observing's picture

I find 500oz per missile a hard number to believe.  Even if ALL the wiring was solid silver, I doubt it would run that high.  Love to see some real figures and the actual reason for the figure, rather than something that sounds like it was pulled from thin air.